Ex-Harrisburg mayor charged with using millions in taxpayer money for antiques roadshow

Those are just three of the estimated 10,000 items former Harrisburg Mayor Stephen Reed purchased with public money as part of a years-long antiques shopping spree and bribery scheme that defrauded bond investors and sucked the financial lifeblood out of his city, according to a state grand jury investigation made public Tuesday.

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Attorney General Kathleen Kane charged Reed, 65, who served as mayor from 1982 to 2010, with 499 criminal charges, including multiple counts of theft and bribery.

He allegedly diverted taxpayer-backed bond proceeds, meant to upgrade a city-owned incinerator and public schools, to purchase millions of dollars' worth of artifacts, such as the 1876 Winchester rifle, on cross-country road trips, the grand jury report says. The purchases were to fill multiple museums Reed envisioned for the struggling city, but most ended up in his home and office and elsewhere, the report says. Most of the museums never were built.

"It's not only deception on the investors and people of Harrisburg," Kane said at a news conference in the Capitol. "It's also like a financial scheme, taking from one to give to another and that other just happened to be Mayor Reed and his interests."

The debt, which has grown to more than $350 million, led to a default on the bonds and the city attempting to file for bankruptcy. The state took over Harrisburg through a program for financially distressed cities, known as Act 47 in 2010, the same year Reed lost re-election.

"He could not have done this on his own and the investigation is ongoing as to anyone who had their hand in this chain of debt that wraps around this city," Kane said.

Up until his re-election defeat, Reed was known as a tireless advocate who tried to revitalize the city's downtown through restaurants on Second Street, a performing arts center, a hotel and minor league baseball. In a statement, the ex-mayor said he would fight the charges.

"I devoted my life to the city of Harrisburg, and I look forward to waging a vigorous fight against these charges," said Reed, who is battling cancer.

With the backing of City Council, Reed used $32.2 million in bond money to have a quasi-government agency, Harrisburg Authority, purchase the city's trash incinerator in 1993. Over the next 15 years, the grand jury report says, Reed talked city and Dauphin County officials into making additional bond deals for the incinerator, city schools and a city-owned minor league baseball team that saddled taxpayers with mountains of debt that far exceed the incinerator's purchase price.

Reed picked all bond consultants and lawyers to handle the transactions and tacked extra fees onto some bond deals, the report says. If council members questioned bond transactions Reed threatened them or bribed them with jobs or political payback in exchange for their support, the report states. Reed then used those fees to set up secret accounts for other projects, including street light installation, building a running track on city land, and buying artifacts, including $471,506 worth in 2003 alone, the grand jury report states.

Reed often was accompanied on his buying trips to California, Florida and the Southwest by Harrisburg police officer Rick Pickles, the report said. Pickles, who was not charged, would then rent a truck to haul back to Harrisburg $100,000 to $1 million worth of merchandise. Pickles was paid by taxpayers on these trips, which he also used for vacation, the report states.

Reed paid top dollar for the purchases even though some of them were not authentic, said Clarke Madden, the assistant state prosecutor leading the investigation. "One person in the grand jury testified that when Mayor Reed came to town, fakes came out and prices went up," Madden said.

Reed was charged with two counts of running a criminal conspiracy, seven counts of bribery and more than 200 counts of theft by either receiving stolen property or using his political office to steal government services for himself or others.

Reed's appetite for collectibles was not a secret. In 2003, the Harrisburg Patriot News began writing about Reed using taxpayer money to amass pieces for Wild West, African-American, Civil War, sports and firefighting museums. The Civil War museum and a small display of firefighting artifacts are the only ideas that came to fruition.

But how Reed was funding his purchases was largely unknown until the Harrisburg Authority conducted a forensic audit of the bonds in 2011-12. The audit led to legislative hearings at the state Capitol. The Dauphin County district attorney's office started a criminal investigation, which it then kicked to Kane's office due to a conflict of interest in summer 2013. That same summer, the city tried to auction off some of the Wild West artifacts Reed had purchased to try to pay down the debt.

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Kane's office then conducted the grand jury probe from its Pittsburgh bureau. Reed and a host of city, school and business officials were subpoenaed. Last month, Kane's office raided Reed's home and office and confiscated piles of merchandise.

The investigation took so long, Kane said, because investigators had to sift through complicated legal and bond documents and had to compel witnesses to testify.

The charges stem from merchandise investigators could verify was purchased with tax dollars, Madden said. The city's record-keeping was so poor, he said, investigators could verify just 10 percent of the 10,000 artifacts Reed is estimated to have purchased.

"What's the value of the charged items we allege were stolen?" Madden asked. "Millions of dollars."

The debt Reed amassed for taxpayers, which has caused the city to sell its parking authority and other assets, is the bigger crime, Kane added.

"The cost to the people of Harrisburg," she said, "far outweighs the millions to the mayor's interests."

But Reed's lawyer, Henry E. Hockeimer Jr., of the firm Ballard Spahr, called Reed a tireless advocate for the city.

"For 28 years, Steve Reed served the people of Harrisburg with energy, commitment and love for the city," Hockeimer said. "He loved his job as Mayor and poured his heart and soul into it."

Hockeimer also questioned the timing of the charges. Reed has been out of office for six years, Hockeimer said, while hinting that Kane filed the charges to blunt her own legal problems involving a Montgomery County investigation into whether she leaked secret grand jury material to material to a newspaper to smear her critics.

"We will fight the nature and timing of these charges, which may be inspired more by political agendas than by a search for justice," Hockeimer said.

During her news conference, Kane batted away reporters' questions about Montgomery County District Attorney Risa Ferman's investigation into the grand jury leak. Kane also said she will not resign if charged.

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"I think it is up to DA Ferman," Kane said. "It's in her hands. We are cooperating with her office."

Madden also denied politics played a role in the charges against Reed.

"There is nothing political about this," Madden said pointing to pictures of artifacts. "These are rooms filled with curiosities and collectibles bought with the money of the city and people of Harrisburg."